The expansion of marketplace lending across Europe will broaden access to funding for small and medium-sized enterprises (SMEs), a credit positive for SME asset-backed securities (ABS), according to a recent industry report by Moody’s.
Larger SMEs, on the other hand, will indirectly benefit from positive second round effects via reduced liquidity risk, as smaller SMEs are often their customers and debtors, the ratings agency added.
It observed that marketplace lending in Europe shows high growth rates, particularly in the UK, at about 60% per year since 2014.
Overall marketplace volumes are still moderate, though, compared to traditional bank lending. In Q1 2018, the stock of SME loans granted via marketplace lending was £2.1 billion, compared to £153.2 billion of traditional bank loans, a share of just 1.4%.
Two years on from closing, the first European SME marketplace lending securitisation shows good performance, slightly ahead of Moody's expectations, with defaults at 6.35% of the original pool balance, Moody’s Senior Research Analyst Frank Cerveny noted.
"The growth of marketplace lending will help SMEs diversify their funding beyond traditional bank lending. Small SMEs, in particular, stand to benefit the most, given their smaller, often short-notice funding needs, which are less attractive for traditional bank lenders.”
